Letters to Barron’s

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July 14, 2018

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July 14, 2018

Proxy Voting

To the Editor: Of course it’s time to improve proxy voting. Past time (“The Proxy Mess,” Cover Story, July 7).

Strikes me that this terrific article revealed in galling detail yet another market failure. Free-market folks, as I was trained to be at the University of Chicago, like to point out that Uncle Milty, as we called Milton Friedman before he won the Nobel Prize, demonstrated the case that a company’s only responsibility is to generate profit for shareholders. Apparently, it doesn’t actually need to listen to these same shareholders.

Free-market folks seem disinclined to note that much of what is construed as profit is actually a market failure in which costs are externalized while profits are kept in-house. From underpaid Walmart employees on food stamps to utilities dumping coal dust in what were once rivers, markets fail all over the place, and as a society, we seem to rail against administrations that try to do something about this.

One wonders where will be born the incentive for management to improve proxy voting. Clearly, it hasn’t been a concern and probably won’t be if the biggest penalty of the current mess is the occasional close vote leading to allowing an activist investor on the board. Rohit Millstein Missouri City, Texas

To the Editor: As an individual investor, the principal problem with the proxy for me is that my vote is nearly meaningless. It is a preloaded vote—the executive officers and board of directors usually hold a significant percentage (at times, even a majority) of the votes, and of course they are going to vote for their proposals, even if it lines (and usually does) their pockets. Then, to add insult to injury, the mutual fund and exchange-traded fund companies rarely contest management, and so the whole vote is preordained. Management wins, and the individual retail guys like me are spitting in the wind.

I still send in my votes after studying all of the proposals, but almost always any dissent is less than 5%, even if the little guys are correct. Our only real hope is an activist who buys a significant number of votes and the management has to listen.

The compensation review process is preloaded, too. The board of directors who are friends of management make the judgments, and all we can do is mark that we don’t approve on the proxy. Again—way outvoted by people who have a great self-conflict.

To compare a CEO’s compensation with the CEO from companies in the field or of similar size is an upward spiral of self-interest. Pay should be set by shareholder, employee, and customer performance, which can be measured with general knowledge of excellence across all of business. For the board of directors to say, well, we need to pay this person this many millions to keep them, might be true, but the real question is, “Can we find/know of someone of similar abilities at less pay?” Bruce Bowden Bellingham, Wash.

To the Editor: Most shareholders vote with their wallets and sell shares rather than try to make changes via a proxy vote. When a holder of one share is able to get a ballot initiative added to a proxy, I find the process somewhat meaningless and am not surprised when “management recommendations” win most of the time.

The process could certainly use an upgrade—SurveyMonkey beats what is currently in place. Juan Mostek On Barrons.com

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Tariffs and Trade Wars

To the Editor: David Breuhan (“Mr. Trump, Meet Smoot and Hawley,” Other Voices, July 7) is right to compare the trade war unleashed by President Donald Trump’s tariffs (and the retaliatory duties passed by the other countries) to the effects of the 1930 Smoot-Hawley Tariff on the domestic economy, global trade, and international markets. Within four years, the stock market had crashed, global trade had decreased by more than 60%, the Great Depression was in full bloom, and the rise of fascism in Europe had begun.

Whether this year’s trade conflict will wipe out all of the market gains since Trump’s election, negate the effect of last year’s tax cuts, or otherwise change the trajectory of the global economy remains to be seen. But Breuhan’s argument that it is a “dangerous way to lead the free world” would be inarguable, but for the fact that Trump’s actions over the past 18 months amount to an abdication of the U.S.’s global leadership role. Michael J. Connelly New York

To the Editor: When one takes on an endeavor, one expects the benefits to exceed the costs. That said, almost all of the reporting to date has focused on the negative aspects of a trade war with China and others, with little or no mention of the potential benefits. Even if the benefits don’t exceed the costs, there are times when taking a stand (e.g., fair trade, reciprocity, etc.) make the endeavor just and worthwhile.

Albert Einstein is often credited with saying, “The definition of insanity is doing the same thing over and over again, but expecting a different result.” This trade issue has been going on for well over 30 years. Time to try something different. Frank Casazza Eagle, Idaho

To the Editor: Your Other Voices essay perpetuates tariff myth and hysteria. Responsible historians say the Great Depression was inevitable, given high speculation, unsustainable debt, a tax policy that grew income inequality, and economic policies that failed to benefit many industries, reduce unemployment, or help the middle and poorer classes.

The main culprits were Federal Reserve inaction and adherence to the gold standard. Tariffs didn’t help, but they weren’t the trigger. We should worry more about massive trade deficits and the spiraling national debt. Jay Starkman Atlanta

Admitting One’s Mistakes

To the Editor: One of the key attributes that Jim Lowell identifies in stellar fund managers is captured with this question: “What’s the one mistake you’ve made since we last spoke?” (“Sizing Up Fidelity and Vanguard Managers,” Mutual Fund Quarterly, Interview, July 7).

Interestingly enough, that question is at the heart of an interview protocol championed by the legendary educator and scholar Martin Haberman in his research identifying the key teaching functions of exemplary educators (Star Teachers of Children in Poverty). Both are interested in a key dimension of exemplary professionals: fallibility.

Successful fund managers and “star” urban teachers are both willing to admit their mistakes and even apologize for them. Both Jim Lowell and Haberman subscribe to the notion that making mistakes and a manifest humility are integral parts of any learning process. Simply put, the inability to readily admit one’s own mistakes is a sign of weakness, not strength, and a major impediment to continuous growth.

Turns out that the behaviors and foundational ideologies of financial experts and star teachers for children in urban poverty have a lot more in common than anyone might have conjectured.

Who knew? John Travers Fairport, N.Y.

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